News

Govt Direction on Transmission May be Needed for Dairy

11 September 2018

NEW ZEALAND - Government intervention in transmission will probably be required if the country is serious about electrifying dairy processing to reduce the country’s carbon emissions, Babbage Consultants associate Richard Stretton says.

Processors Synlait Milk and Fonterra Cooperative Group have committed to electrify small sites as part of a progreamme to reduce coal as a fuel source for processing capacity.

But driving electrification of processing at scale will require significant investment in distribution and transmission capacity, Mr Stretton said. Private investment is probably a good source of funding, but it will need certainty and a degree of planning to make it happen.

Unlike biomass, another low-carbon alternative to coal, the government does have some levers it can use to improve electricity supply, said Mr Stretton, who manages Babbage’s process and services engineering arm.

“Personally I think electricity is probably the easiest – if you are thinking about something that government can influence,” he said in an interview for BusinessDesk.

“It’s definitely a question for the country – generation, distribution and storage probably as well.

“If the goal is to reduce carbon then there is a cost that someone somewhere has to carry.”

Heavy industry and manufacturing accounted for about 15 per cent of the country’s emissions in 2016, according to the Productivity Commission. Within that, dairy processing was the second-largest contributor of process heat emissions, after petroleum and chemicals manufacturing.

Last week the commission recommended the country pursue greater electrification of transport and heavy industry in order to meet its net-zero carbon goal by 2050. Other initiatives included large-scale forestry planting to absorb emissions and greater use of emerging technology to reduce on-farm emissions from livestock.

Auckland-based Babbage has advised most of the bigger dairy processors on recent expansions. Major projects include: the electrode boiler Synlait is installing at its Dunsandel plant later this year; the two large whole milk dryers Fonterra installed at Darfield; the upgrade of that firm’s Lichfield site south of Putaruru; and the infant formula plant Yashili commissioned at Pokeno in 2015.

Synlait is planning to install a 6MW electrode boiler at Dunsandel this summer. It will run at half capacity initially and can be upgraded to 12MW.

In July the company said the total investment – including the network upgrade and running costs – on a 10-year basis will be about twice what the company would have spent on a coal unit.

Mr Stretton noted that adding 6MW of load is like adding a small township to a network. While units up to that size may be accommodated relatively easily on some networks, he thinks others will require much greater investment, and longer planning times, particularly if national grid operator Transpower also has to reinforce its assets.

The volume of coal used by dairy processors on the South Island, coupled with the scale of some of their sites, means the country would probably get more “bang for your buck” in emissions reduction by making the transmission investment to get more power to those operations, he said.

While there is also a lot of growth on the North Island, processors there also have a wider range of energy options, including coal, piped gas, and geothermal and biomass in Northland and the Central North Island.

Mr Stretton noted that biomass is also a good option in parts of the South Island. Using it for base-load steam supplies and coupling it with the flexibility of an electrode boiler could work well for some operations.

“In some parts of the South Island that could be the most economic option.”

Mr Stretton said the economics of the different fuel types can vary widely according to the scale of the plant, its location, and the price of fuel and fuel transportation that can be negotiated. There are no silver bullets and firms need to identify the best options for each site.

Excluding any network upgrade costs, he said the capital cost of electric boilers tends to be about 60 per cent more than that of gas, diesel and LPG-fired units.

Biomass, coal and lignite boilers all have similar costs and tend to be two- to five-times the cost of natural gas boilers, which at smaller sizes come as "off the shelf" packages.

But in terms of fuel cost, lignite is the cheapest. Coal is about 60 per cent more expensive, while natural gas tends to cost two- to three-times as much as lignite, he said. Diesel costs are similar to those of electricity which are also 10 to 40 per cent higher than gas prices. LPG currently costs about 50 per cent more than diesel, he said.